Logistics issues hamper Asia-Pacific e-commerce growth

Tuesday, April 23, 2013

Asia-Pacific e-commerce growth could be limited by the region’s logistics capabilities, according to a new report by Transport Intelligence.
The report, Asia Pacific e-commerce Logistics 2013, points out that the region is the world’s fastest growing e-commerce market and has the potential to become the largest market for e-commerce sales in the next few years, with 33 percent expansion in the e-commerce logistics market in 2012.
“This is a region that has long been dependent on exports, with infrastructure developed to support this type of demand,” said Cathy Roberson, Ti’s senior analyst and lead author of the report. “The dramatic rise in domestic e-commerce sales has put a strain on infrastructure which is now proving to be a hindrance to market growth; thus creating considerable challenges for governments, retailers and logistics providers alike to overcome. However, projects are underway to establish improved road and rail networks, better delivery service options and to expand warehousing and distribution centers. It remains to be seen if these developments can keep pace with the growth of e-commerce.”
One of the main concerns is the need for modern warehousing, the report said.
“In China and India, for example, warehouses have historically served merely as storage facilities,” Ti said. “The increase in e-commerce has resulted in demand for not only more warehouses, but also for facilities that are automated and integrated into retailers’ websites and store-fronts along with capabilities such as pick and pack. These facilities need to be located in more convenient locations as many consumers expect same-day or next-day delivery.”
Another key issue outlined in the report is the limited access international logistics providers are permitted in domestic markets, if any at all. For example, UPS and FedEx were only granted limited licences to operate in China in 2012. Domestic providers do not necessarily have the capital to invest in major network overhauls and new start-ups are entering the market to fill gaps in the e-commerce supply chain. This has led to a high level of fragmentation and disjointed service capabilities.
“Furthermore, retailers have taken it upon themselves to develop their own logistics networks to overcome the shortfall in suitable domestic transport solutions,” Ti said. “For example, Alibaba, Flipkart and Rakuten have all incorporated logistics as part of their individual corporate strategies. Governments across Asia have been encouraging e-commerce as a platform for export growth, but they must now focus on developing domestic infrastructure to enable postal and logistics providers to enhance their service offerings and allow the region to continue its e-commerce growth spurt.” - Eric Johnson